St. Andrews University Europe Society, 28 March 2002

Did everything change on September 11th? Actually I believe things started changing long before 9/11. They started back in November 1989 when the Berlin Wall was breached. They probably even started before that with President Reagan's evil empire speech in Reykjavik. This signalled the final assault on the walls of Jericho. This directed America's efforts into the high technology of modern warfare with which the Soviet Union was unable to compete and with which the European allies were unwilling to compete because of their higher priority of pursuing an expensive humane social economy.

Most of you may have been too young to remember, but in the 1980s the United States was far from the sole top dog, either economically or in defence terms. When I was first an MEP in the early 1980s one of the rationales for the then European Community and of course for NATO was that 50 miles the other side of the North Sea were lined up the tanks and the massively outnumbering manpower of the Warsaw Pact, the overwhelming and frightening nuclear arsenal of one of the world's then 2 superpowers. Every other day interceptor jets were scrambled from Leuchars RAF base to intercept and shadow probes by armed Soviet bombers down the North Sea. Our North Sea oil fields were defended by naval ships on station and fighter planes on patrol.

Genuine human communication and relationships across the Iron Curtain were well nigh non-existent. Quite often committees of the European Parliament would meet in the Reichstag in Berlin. The East wall of that building was THE WALL. From the windows you looked down into the minefield across to boarded up windows. At the end of the building was a group of crosses, each signifying one East German who had been killed as he or she tried to cross that barrier to freedom. At the same time it was not America to which we looked as the superpower of economics and technologies. It was Japan. The American motor industry appeared to be in final decline, threatened by Toyota and Honda. The new electronic gadgets, which amazed us with their miniaturisation and versatility, all seemed to come back with friends who had visited the Far East. The Tokyo stock exchange outranked the New York stock exchange in market capitalisation with price/earnings ratios in the 80s and above. How could a company be worth 80 times its current earnings? We all came to believe that with Japan even this was possible. The Americans were on their uppers - the Europeans not far behind. The best we could do was to welcome the flock of Japanese tourists spending their yen and Japanese corporations voraciously buying up our products and our companies and introducing their amazing new systems of management, especially of man management and fault-free lean production. At least we had quite open communications with the Japanese, even if we did not always fully comprehend why they appeared so successful and were soon to discover that even this success concealed some inherent weaknesses which would come home to roost.

But with the Soviet Union all was opaque. We probably exaggerated the threat. How could a system which could not organise itself to feed itself despite possessing some of the most fertile land in the world, where the lifts and telephones didn't work, where the mass of the population lived drably, and would increasingly realise this from their TV screens beaming in from the West. How could such a country compete in military hardware and motivation of its people? Well, it couldn't. And finally the truth came out. With the Soviet Union and later with Japan.

Meantime Europe also had been succumbing, perhaps more gracefully, but still as inexorably, from being the miracle economy of the 1960s into a comfortable middle age, increasingly resting on its laurels, cashing in on its previous success to prop up an increasingly rigid and uneconomic social welfare system and labour market. When the Berlin wall came down there seemed to be a further opportunity to reap the peace dividend, cut back on our defence expenditure and redirect resources into further prolonging our happy, socially comfortable existence. We could even indulge in the luxury of deprecating other "less civilised" systems such as the raw and naked capitalism, the over eager long hours of hard productive work, the wealth/poverty divide practised (or perceived to be practised) in the USA. But across the Atlantic our American friends and allies had been chastened by the Japanese challenge. Their political leadership and their fundamental Adam Smith approach to open markets, the native spirit of enterprise of the American people, the shift to an incentivating low tax regime all came together for them to gird their loins and grapple their way back up the competitive ladder. To some extent the pump was primed by the increase in public sector spending on defence and especially on high-tech defence research - STAR WARS indeed. This got going before 1989 before the break up of the Soviet empire. It may well have been the final straw which broke the Soviet camel's back. President Reagan was not too worried about deficit spending. He set his targets and went for them regardless. We first saw the results when cruise missiles followed the street plan of Baghdad and precisely targeted the entrance way of the Iraqi defence department. While RAF fighter pilots (some from Leuchars) were hazarding themselves and their planes with courageous and questionably effective low-level sorties against well defended Iraqi airfields, their American colleagues were safely ensconced on warships in the Persian Gulf monitoring unmanned cruise missiles which almost always destroyed their targets with incredible accuracy. If Iraq was the first evidence, this was confirmed in Afghanistan.

As in the defence field, so in business and industry. It gradually dawned on us that we were being overtaken and being left wallowing in the dust. Route 121 round Boston, Silicon Valley, The North Carolina Research Triangle, Northern Virginia and Maryland, Intel inside, Microsoft. Suddenly it was no longer Japan. The breakthroughs in technology, in information technology, in biotechnology, were coming from America. Venture capitalists willingly took well calculated risks. Billionaires proliferated. Stock exchanges zoomed and boomed. Entrepreneurs risked all. OK - dot coms came unstuck, stock markets checked themselves, but still the outcome of the last 10 to 15 years in the US has been amazing. Research expenditure in the USA is running at 3 times research expenditure in the EU. Defence expenditure in the USA equals the next 8 national defence expenditures, combined Only in welfare and social expenditure is Europe outstripping the USA. And what is the result? Job creation in the US, unacceptable unemployment levels in the EU, America rampant militarily, and the only political superpower dominating and striding the world; Europe pusillanimously following in the wake, largely ignored in political terms whether by Israel, Zimbabwe or America itself, barely able to manage Bosnia or Kosovo without American help.

Given the turnarounds which even I have seen in my lifetime, the present balance will not necessarily continue. Sooner or later America and the Americans, like the Europeans and Japanese (and the Americans for that matter) before, will become overconfident, even arrogant and will begin to relax on their laurels. They will choose the comfortable route. Their zeal will diminish. Others will be chastened into activity and will improve their relative performance. So they in their turn emerge above the crowd.

Perhaps we are beginning to see the first signs of boiling over in the unilateralist tendencies appearing in America; ignoring counsel from foreign allies, in pursuit of domestic political aims, abrogating long established treaties, declining to join the world team in aid of our global environment in treaties such as Kyoto, slapping on protective tariffs regardless of international obligations, threatening dire consequences on friend and foe if they don't accede, falling back on an extreme form of jingoistic patriotism or nationalism, deprecating all criticism, domestic or foreign, as hostile envy or treason redolent of McCarthyism or playground bullies.

We Europeans may be quick (too quick?) to identify these traits and tendencies in our American friends, but to a large extent it is our fault that we have allowed the New Atlantic Paradigm to get out of balance. I think we do now realise this, and we are trying to come to some sort of consensus as to how to proceed and rectify this imbalance. And consensus is a requisite, a difficult requisite, because we lack the single focus of power and policy decision-making which lodges in the American President.

So it was that 2 years ago at the EU summit in Lisbon, our leaders determined to make Europe by 2010 "the most competitive and dynamic knowledge-based economy in the world". So it was that our leaders determined to boost Europe's military capabilities with the European Security and Defence Policy and with a Rapid Reaction Force ostensibly to take care of our own back yard, notably the Balkans. So it was that the combined efforts of the EU in foreign policy have been concentrated in the single person of Javier Solana, the EU's High Representative for the Common Foreign and Security Policy, the single telephone number which Mr. Kissinger always bemoaned the lack of in Europe. Even without the spur of the Lisbon process, to modernise and revamp the European economy - the EU is still a massive economy - the largest GDP in the world, and set to get even bigger with enlargement to Central and Eastern Europe, by far the biggest trading bloc and donor of aid to the 3rd world. But even if Europe is an economic giant it is undoubtedly still a political pygmy. Fine words and declarations are fine, but what about the action which translates fine words into results?

My purpose for getting into politics, and particularly European politics has always been, and remains, to try to make the world a better place for this and future generations. It is all very well to have such an ambition, but implementing it depends on having the necessary power and influence as well as the political will. I believe Europe and Europeans, our history, our culture, and our approach to the world and to life have something to offer. Only if we reassert ourselves in the world and in particular in our relationships across the Atlantic, will we be able to see the fruits.

What therefore do I see as the essential steps we need to take to realise our ambitions? First for Britain - I would suggest that we should realistically assess our influence in the world. Just how much influence do we have, or how much control over the environment in which we operate when standing on our own, and how much more influence we might have by "pooling our sovereignty" with others of like mind. Yes, we could pool our sovereignty with the most powerful, for example with the USA. Our contribution to the pool would be relatively small and so our influence correspondingly limited. Even if we would nominally be part of the world's only superpower. This would be rather similar to the position of (say) Nigeria in the British Empire when Britain was the world's superpower - mathematically 50 points out of 1000 - with the other 950 points being the dominant partner- the USA. Or we have the European Union, where (if we were to be fully involved) we are one of the 15 current partners and one of the 4 or 5 biggest participants, arguably the 1st, 2nd, or 3rd , depending how you calculate it; in terms of power and influence, roughly 150 points out of 1000, say, with the remaining 850 divided between 14 other countries. Of course - if we continually stand on the edge of the pool shivering we are much less likely to have any influence on the outcome of the water polo match. So let's get fully involved. Less of the reluctant bride. We need to mobilise and maximise those 150 points.

Now what should we be influencing Europe to do? With our new found fully involved role we could indeed have an influential part to play. What are our prime objectives? To make the world a better place, peaceful, secure? Not just altruistically, but also very much in our own selfish interest. For Europe to be able to achieve this it first must be credible in world terms. For Europe to be taken notice of by the current only superpower and by all the other lesser participants on the world stage we must be respected. I believe respect does begin with economics supported by military potential perhaps and by an estimable moral force. And if economics are the key to power and influence, that is where we should start.

So it was that at Lisbon two years ago the European Council, the prime ministers and heads of state of the 15 Member States, made their famous declaration that by 2010 Europe should be "the most dynamic and competitive knowledge-based economy in the world". From this broad ambition came various essential steps. For example, completing the single market in financial services, improving access to risk capital, liberalising the energy markets for electricity and gas and other traditional state monopolies, introducing a Community patent which would cost no more than the American equivalent, increasing the EU's spending on research in the new technologies, encouraging and fostering enterprise and entrepreneurs, and so on. With success in these areas, then we will see new businesses start up, innovation in science and technology, more and better jobs, increased prosperity, scope for less burdensome taxation, which will encourage risk taking and so produce more new businesses and jobs, the much-prized virtuous cycle. If nowadays the holy grail in technology is MIT, or in business, Stanford or Harvard Business School, or in medicine, Massachusetts General, Duke Medical Centre, or the Mayo Clinic, we should be aiming for European institutions and institutes to match or surpass these. But all these elements of a dynamic, competitive knowledge-based economy are interdependent. The European Parliament has passed several vital directives concerning financial services, telecoms and energy markets The Council of Ministers is running further behind, but even there we can see some signs of urgency developing and not before time. The clear tendency towards the right in the political balance in Europe is helping to push this along. The European Parliament has had a centre-right majority since 1999. The lonely Spanish Conservative government has been joined by the centrist New Labour governments in the UK and Sweden and by the centre-right governments in Austria, Spain, Italy and Denmark, which are mostly bent on realising the changes specified and implied by what we call the Lisbon Process. Perhaps France and Germany will follow along later this year. But to get the snowball rolling it is essential that our governments, our politicians and authorities, provide the environment where risk taking, investment, enterprise and innovation, hard work and success are recognised and rewarded, where cumbersome red tape and regulations on freedom of action are kept to an absolutely essential minimum. It is very well to advocate these steps but almost certainly they imply various actions which are not cost-free, in political terms at least, in the short term. That is why we have such difficulty getting these essential building blocks in place. For example the liberalisation of the energy market is a great difficulty for Messrs Chirac and Jospin in advance of the French Presidential elections or the Germans' difficulties, when Mr Schroder is facing a difficult general election, on deregulating shopping hours and sales promotion methods and with a realistic take-over regime which will expose Volkswagen and its thousands of workers to a more uncertain future ownership. Or Mr Blair's problems with the trade unions, the source of much of Labour's financial and electoral support, when he is advocating and supporting European moves towards a less-regulated, more versatile labour market which will leave workers' job security less certain, even if it is also more likely to promote more jobs. Less understandable, but nonetheless obstructive, are matters of national (or nationalistic) pride, for example the impasse over the Community Patent, which is essential to provide protection for intellectual property and thus encourage innovation, which is economical and legally certain. And what is the cause of this impasse? Language! The cost of processing a European patent is three times the cost in America due to the expense of translating the highly complex technical papers, and frankly to little purpose, as almost all the relevance is in the English language version. But it is just not worth a Danish politician's skin (or Dutch, Flemish, Italian, Finnish, Spanish) to give up insistence on their language in favour of a system based on a maximum of 2 or 3 languages. However there are signs that already 2 years into the Lisbon process certain measures are coming through and that the pace is accelerating.

We all know what is needed, the list has been made. What we now need is implementation, the political will to implement all that we all know and accept is essential. This does not mean accepting hook, line and sinker all of the American economic and social model. Europe is still determined to keep what we generally agree are the essentials of a human dimension in a more dynamic economic environment. And if indeed our economies are beginning to take a turn for the better, there are opportunities for faster implementation of the necessary structural reforms. And so we get our economy and our economic structures right, the necessary steps to establish our status as the world's prime economic power.

The stronger our economic status the more essential a partner we become to others whether third world, middle world or first world. Our strength in negotiating with all these, on economic and trade issues certainly, but also on political issues, will be enhanced. Europe has a particular interest and point of view on the Middle East, for example. Until now we have been very purposefully excluded by the Israelis, despite our being their major trade partner, while the Americans have relegated us to the touch line. Could we have done better? I can't be sure, but we could hardly have done worse. We do have to improve our system of arriving at foreign policy positions. Probably this has to be brought from a purely inter-governmental process into the 1st pillar, a controversial proposition, a more integrated foreign policy process, speaking with a much stronger single voice. And what about the military? First and foremost we must restore and increase substantially levels of expenditure on military research and hardware in efficiently and cost effectively run military services. But expenditure is not the only matter. Procurement of military equipment must be on a European single market basis. It is surely a nonsense for each country to favour its own national champions for military equipment when economies of scale, specialisation, competition and excellence would be achieved by working on a Europe-wide canvas. Surely it is commonsense that communications equipment, weapons and ammunition, vehicles and spare parts, should be compatible and interchangeable between all the partners. There is no reason why this enhancement of Europe's military capability should in anyway threaten the all important NATO alliance. Indeed the whole purpose would be to strengthen the alliance by Europe playing its full part and matching America's contribution to our European peace and security.

Only by being a partnership of equals will we realise the acceptance of Europe's political concerns, of Europe's point of view, as having equal force and consideration. The North Atlantic relationship has clearly got out of balance. It is up to us Europeans to get it back into balance, so that we and our American friends can work together on equal terms for a secure, peaceful and prosperous world for the next 50 years - the New Atlantic Paradigm.